Is that a stimulus, or are you just happy to see me?

A little over a year ago, I wrote this:

A stimulus package therefore is a suckers game. The market crashed when everyone realized that selling dogfood online wasn't the revolution it was cracked up to be. Bush, Congress and the Fed threw money at the problem, literally. Consumers took the money, avoided the stock market (won't be fooled again) and blew a big real estate bubble (okay, they will be fooled again). What happens when the real estate bubble pops? The powers that are loosen the purse strings...

Now, there's a TON of money that's been ejected into the economy in the last year. TARP was more than half a trillion. The stimulus bill that recently passed was closer to a trillion than half of one. Low interest rates courtesy of the Fed, government-financed troubled-asset buyback plans, and warranty guaranties for GM (okay, that last one isn't really significant relative to the others, but it is pretty wild)?

1.5 trillion? 2 trillion? More? Depends on whose numbers you're using, but any way you slice it, that's a lot of money. Where is it all going to go? Well, some will go straight to inflation. We'll buy the same stuff as before, made by the same people as before, but we'll be paying more since we'll have more money chasing the same goods.

Hopefully though, some of it will go to employing our currently unemployed resources. That's the whole point. Unemployed workers, entrepreneurs with ideas but no funding... these are the things that, when employed and funded, prompt economic growth and recovery.

What, though, will the unemployed workers get jobs doing? What ideas, though, do the entrepreneurs have? In our last bubble, cheap money chased housing, so resources and labor were deployed there. In the bubble before that, cheap money chased internet startups, so the entrepreneurs in that space got literally more funding than they knew what to do with.

Are we to believe that there won't be overshoot this time? Of course not! We'll be fooled again, and the cheap money will chase something that will seem weird this year, revolutionary next year, proven the year after that, and hopelessly retarded the year after that. Retarded like these guys, or like a subdivision of multi-million dollar houses 40 miles outside of Phoenix.

How to spot the next bubble? Hard to say. We can assume that there will be Zeitgeist clues like Time magazine covers, explanatory documentaries on network television, and a whole section of the bookstore dedicated to books on the subject. Another clue: previously rather non-wealthy individuals making a ton of money at some trade that wasn't popular last year, or maybe didn't even exist yet. Another clue: whatever it is, Warren Buffett won't be investing in it.

Will this bubble be as bad as the last one? Well, there's WAY more money looking for a place to go, so that doesn't look good. On the other hand, firms might have learned their lesson on leveraging (and if they haven't, the government might try to impose that lesson anyhow), so maybe there won't be a huge multiplier from derivative investments like there was this time.

Any guesses? Well, some folks have been throwing around the idea of a Green Revolution. Lots of legitimate opportunity there, but also an opportunity for over-investment in good-sounding but bad-in-practice ideas. That's just a wild guess though, it can be anything. There have been bubbles in tulips and beanie babies, so it's not like there's any guarantee that it's going to make the least bit of sense.